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A situation that nobody wants to find themselves in: There is a letter in the mail from the local district court transmitting a lawsuit from abroad. The accompanying letter from the local district court usually states:
“Ladies and Gentlemen,
An important document from a foreign court is waiting to be served on you.
You are kindly requested to collect this document within a period of one week. to collect it.
You are already advised that you may suffer disadvantages in the foreign proceedings if you do not collect your documents.”
Such an inbox is likely to leave even experienced entrepreneurs perplexed at first.
Problem description
The accompanying letter quoted above suggests that a suitable response to the complaint should be made in any case.
If it is apparent that a foreign court has jurisdiction, the case is clear insofar as a reaction (active defense abroad) is indeed appropriate.
However, especially if you as the defendant are of the opinion that the foreign court does not have jurisdiction (e.g. due to a jurisdiction agreement concluded with the plaintiff), the question arises as to whether it is necessary to respond to the claim at all. The often very considerable costs associated with a legal defense abroad play a role here. Another aspect that makes it difficult to react is usually the lack of a lawyer’s contact in the country concerned.
Lawsuit from abroad – My “guide”
The following article, which is based on the author’s experience from his practice as a lawyer, is intended to serve as an initial guide. However, the complexity of the matter in question means that advice in individual cases appears irreplaceable. This is particularly true in view of the fact that there are considerable differences between claims from other EU countries and those from outside the EU.
Key points to consider when filing a lawsuit from abroad
If you receive a complaint from abroad, you should first check the following points:
Basic question: Action effectively served from abroad?
The first question you should ask is whether the claim has been effectively sent to you at all. It is not uncommon for formal requirements to be lacking, which may mean that the action has not reached you at all from a legal point of view. The requirements that must be met for service are set out in the applicable international conventions in individual cases.
In the EU area, for example, the EU Service of Documents Regulation (Regulation (EC) No. 1393/2007 of the European Parliament and of the Council of November 13, 2007 on the service of judicial and extrajudicial documents in civil or commercial matters) applies, according to which the action must generally be transmitted in German translation and accompanied by a form and instructions on the right to refuse acceptance. Please read my separate article on this in detail.
In the case of claims from outside the EU, I am happy to help you identify the regulations to be observed.
Foreign court responsible?
The advisable course of action is determined by the question of the legal situation regarding the jurisdiction of the courts. In this respect, a uniform assessment is not possible because legal “specialties” must be observed in many countries. Nevertheless, the following statements should apply in general:
Absence of any agreement on jurisdiction
If there is no agreement on jurisdiction with the foreign plaintiff, the question of jurisdiction can usually be clarified easily.
This can then usually be determined via relevant international agreements.
Jurisdiction agreement in favor of the German defendant
If there is a jurisdiction agreement between the foreign plaintiff and you, and there are no concerns about its validity, the situation seems clear:
In accordance with the agreement, the agreed German court should have jurisdiction. The foreign action would then have to be dismissed as inadmissible.
“Specialties” of some jurisdictions
However, caution is advised in some jurisdictions:
In principle, the parties have the option to contractually stipulate which court at which location has jurisdiction for their disputes. Under German law, these courts then also have exclusive jurisdiction.
Example: Australia
However, this is different in Australian law, for example.
There, too, it is generally possible to agree a place of jurisdiction by contract.
Mostly only “additional place of jurisdiction”
However, a jurisdiction agreement generally only establishes an additional and not an exclusive place of jurisdiction there, as a legal principle applicable in Australia prevents the parties from depriving a court of jurisdiction by means of a contractual agreement. This is intended to prevent agreements that can deprive Australian courts of jurisdiction.
Review by Australian court
In this respect, a jurisdiction agreement must withstand review by Australian courts. If the review by an Australian court is not upheld, a business partner domiciled in Australia can also sue in Australia, e.g. if the place of performance for contractual services is in Australia.
Special jurisdictions
In addition, Australian competition law makes it easy to establish the jurisdiction of Australian courts. For this purpose, it is generally sufficient for the Australian plaintiff to assert in its action that the defendant has committed anti-competitive acts to its detriment on Australian soil.
Interim conclusion regarding jurisdiction agreements:
In the case of jurisdiction agreements, you must ensure that the law in the country of the foreign partner accepts jurisdiction agreements as exclusive. Otherwise, you run the risk of the agreement coming to nothing in an emergency.
Arbitration agreement
If you have concluded an arbitration agreement with the foreign claimant that meets international requirements, you should have the most secure basis for defending the foreign claim as inadmissible.
An effective arbitration agreement regularly removes the dispute from the jurisdiction of the state courts – e.g. also in Australia – as the party invoking the arbitration agreement has a statutory right to an order to stay the proceedings.
Is the claim justified on the merits?
Finally, in addition to the question of court jurisdiction, you should also examine the merits of the claim. After all, the choice of the appropriate response also depends on this.
Response options to lawsuits from abroad
Once you have completed the above checks, you will be able to determine the appropriate response option for your case:
Case 1: Lack of effective service, foreign court has jurisdiction in principle
If there is already a lack of effective service, the action is not yet “in the world” from your point of view, so to speak.
In this case, I would recommend ignoring the claim, provided that the foreign court has jurisdiction in principle. However, the prerequisite would be that there is no doubt as to the invalidity of the service.
It should be noted that the EU member states are cooperating ever more closely with regard to legal actions from within the EU. The declared aim is to facilitate cross-border court proceedings as far as possible. This also results in a certain obligation to cooperate on the part of economic operators, with the consequence that you may be expected to not simply ignore a complaint that suffers from formal deficiencies. It is therefore advisable to inform the court of the deficiency in service, whether by e-mail or otherwise. In this way, you will have something in your hand to prove your cooperation in the case.
Case 2: Lack of effective service, foreign court also lacks jurisdiction
In the event that there is no effective service of process and the foreign court is deemed to lack jurisdiction, the following procedure is required:
Assuming that the action has not (yet) been served, i.e. that it is not yet “in the world” from a legal point of view, you should now immediately contact the competent German court and file a so-called negative declaratory action with the application that the claim in question does not exist – regardless of whether you consider the claim to be well-founded or not. In doing so, you should ensure that you not only file the action with the German court as quickly as possible, meticulously observing all formalities, but also effect service on the foreign opponent. The aim is to anticipate the effective service of the foreign action on you. If you succeed in doing this, the problem of foreign proceedings is as good as “off the table”.
Case 3: Foreign court has jurisdiction for validly served claim and claim is justified
If the examination has shown that the foreign court has jurisdiction for the action from abroad and that the claim asserted is also justified, the priority is to keep the costs to a minimum.
Depending on the circumstances of the individual case and the jurisdiction concerned, the following options for action may be considered:
Option 1: Do not react
You do not react and let things take their course. This course of action saves you the often considerable legal costs abroad. You also have the option of relying on an obstacle to enforcement:
It should be borne in mind that judgments from non-European countries in particular must first be declared enforceable in Germany in a rather complex procedure. This can sometimes result in insurmountable obstacles for the foreign plaintiff, which in the end permanently block the enforcement of the judgment in Germany.
It is true that the enforcement proceedings themselves represent a cost item. However, this is offset by the saved foreign lawyer’s fees.
Option 2: Recognition
If you are of the opinion that this is a surprising claim that you did not have to expect, a so-called immediate acknowledgement could possibly be considered, whereby the costs incurred could possibly be charged to the claimant. You should check whether there is a so-called acknowledgement or a comparable legal institution in the jurisdiction concerned.
If necessary, the legal situation should be checked by a lawyer working in the jurisdiction concerned and the necessary steps taken. I would be happy to use my extensive experience to assist you in selecting a suitable colleague and can also take care of all the correspondence for you if required.
Option 3: Contacting the opponent
It also seems advisable to contact the plaintiff out of court, taking into account the time limits applicable in the foreign proceedings, in order to bring about a quick and cost-saving amicable settlement. I will be happy to support you in this.
Case 4: Foreign court lacks jurisdiction for validly served claim, but claim is justified
If the court does not have jurisdiction, but the action is justified on the merits, the focus is again on keeping the costs low: In relation to case 3, there are even more arguments in favor of not reacting at all:
Option 1: Do not react
If you do not respond to the action brought before the court without jurisdiction, it seems reasonable and could be handled accordingly by a German court that a judgment issued by the foreign court without jurisdiction is an obstacle to enforcement. The judgment might be worthless for the plaintiff.
But:
Without an objection to jurisdiction raised in the context of the foreign proceedings, there is some evidence that the German court dealing with the declaration of enforceability would ignore the lack of jurisdiction. This constellation is controversial among lawyers
Option 2: Objection to jurisdiction
For the aforementioned reason, it therefore seems preferable to raise the objection of jurisdiction before the foreign court in any case. This could be combined with efforts to reach a settlement. The lack of jurisdiction of the court seized by the plaintiff would be a suitable ground for negotiation here.
Case 5: Foreign court lacks jurisdiction for validly served action, claim also unjustified
If your examination has shown that the foreign court does not have jurisdiction and that the asserted claim does not exist, your alternative courses of action are as follows:
Option 1: Objection to jurisdiction, alternatively assertion of unfoundedness
They object to the foreign court’s lack of jurisdiction and, in the alternative, plead that the action is unfounded.
This is the safest course of action, although it does involve accepting the often very considerable costs of the proceedings (= legal fees and court costs). It should be noted that – unlike in Germany – in many countries there is only a limited and difficult to calculate claim for reimbursement of costs. This means that even if you are completely successful before the foreign court, you could still be left with a considerable proportion of the costs.
Option 2: Do not react
For the somewhat more courageous defendant, the alternative from case 4 would again be available, which consists of not responding to the action and relying on the fact that the court responsible for enforcement, if applicable, assumes a (final) obstacle to enforcement.
This option is (unfortunately) not recommended. There is too great a risk that the foreign court will uphold the claim despite it being unfounded and you will end up having to “answer” for a claim that is in itself unfounded.
Option 3: Counter-attack through negative declaratory action in Germany
Finally, according to the motto “attack is the best defense”, it is possible to file a so-called negative declaratory action in Germany. This action would be aimed at the German court declaring that the claim asserted abroad does not exist.
In principle, the so-called priority principle and the principle of priority of the action for performance preclude such a procedure in the constellation discussed here. Accordingly, in the event of two actions concerning the same matter in dispute, the action brought first takes precedence (priority principle), and an action for performance concerning the same matter in dispute takes precedence over an action for declaratory judgment.
Nevertheless:
In principle, a foreign judgment can only be recognized in Germany if the foreign court that issued the judgment also had jurisdiction at the time it was issued. In principle, this argument can also be used to override the priority principle and the priority of the action for performance. It could be argued vis-à-vis the German court that the foreign court does not have jurisdiction and, as a result, the action for performance there is inadmissible and therefore does not have priority.
In addition, it would be advisable to at least raise the objection of jurisdiction before the foreign court. In view of the costs of the foreign proceedings, it would be conceivable to claim these as damages before the German court.
Option 4: Combination of action for performance and action for negative declaratory judgment
Last but not least, it is advisable to check whether your own claims against the foreign plaintiff are possible. These could then be asserted by you by way of an action for performance in Germany, in combination with an action for a negative declaratory judgment aimed at establishing that the claim asserted abroad does not exist. In contrast to the aforementioned combination, the problem of the priority of the action for performance could be circumvented by means of the argument of the factual connection.
Conclusion on the lawsuit from abroad
The above overview should have shown that, in the event of a claim from abroad, there are numerous options for action that need to be weighed up carefully. I will be happy to support you in choosing and implementing the best solution for you in each individual case.
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